Intellectual Property

A Federal Court ruling in favour of internet service provider iiNet could have international ramifications for the fight against illegal content.

The Australian film and television industry today lost its case against iiNet, whose customers downloaded pirated movies and TV programs.

In a landmark judgement, Justice Dennis Cowdroy ruled the internet service provider (ISP) was not liable for the downloading habits of its customers.

RMIT University’s general counsel John Lambrick says today’s ruling will see ISPs breathing a sigh of relief.
“It was held that there was no question there had been some unauthorised use by some of the account holders and they were in breach of copyright,” he said.

“But Justice Cowdroy maintained that just because they were in breach of copyright, that didn’t mean that for the purposes of the Copyright Act iiNet authorised the breach.”

A group of over 30 film and TV companies launched the action against iiNet, maintaining the ISP had breached its user agreement by allowing members to use BitTorrent software to download content illegally.

But the court ruled while iiNet involvement was necessary for the copyright to be breached, it was the use of BitTorrent software that enabled the breach.

“You can breach copyright in two ways. One is by directly breaching it, which the users did; and secondly you can authorise a breach of copyright, which you can sometimes do by putting people in a position where they can breach copyright,” Mr Lambrick said.
“Now what Australian Federation Against Copyright Theft (AFACT) had argued was that by providing its internet service, iiNet was putting its account holders in a position whereby they could breach copyright directly themselves.

“Justice Cowdroy found it wasn’t the ISP’s system that was responsible for the breach of copyright. It was actually the BitTorrent system which was the means by which copyright was breached.”

Double blow
In a further blow for content producers, Justice Cowdroy went on to rule that even if iiNet was to be found guilty of the breach, safe harbour provisions meant the ISP could not be sued for damages.

“Safe harbour provisions are contained in the Copyright Act, and in essence they provide that even if an ISP is found to have authorised a breach of copyright by its users, an ISP won’t be liable for damages if it complies with the conditions of the safe harbour provisions,” Mr Lambrick said.

“And the broad thrust of those safe harbour provisions is that the ISP must have a policy of terminating the accounts of repeat infringers and reasonably implementing that policy.

“Justice Cowdroy went on to find iiNet did in fact have a policy of terminating the accounts of repeat infringers, so even if it was found to have comprised a breach of copyright it wouldn’t have been liable for damages.”

He says the case has the potential to set major precedents in who is responsible for illegal downloads, as Australia’s laws in the area reflect that of the US and European Union.

“The reason being that this is one of the very few cases involving an ISP who’s been sued by a content owner that has actually gone to court, and so it does create a significant international precedent,” he said.

“Or at least it will create international interest mainly because the US and the European Union have legislation similar to our safe harbour provisions which were based on the US Digital Millennium Copyright Act.”

“Evidence was provided to iiNet; evidence that CEO Michael Malone of iiNet described as compelling evidence,” he said.
“We were hopeful that iiNet would comply with our terms and conditions which clearly stipulate that their users cannot use their accounts for illegal means.”

Mr Gane says the film industry cannot compete with illegal downloads.

“It’s very difficult for the movie industries to compete with a free alternative which is perpetrated by theft,” he said.

Meanwhile, iiNet’s chief executive officer Michael Malone says the company is delighted with the court decision.

“Particularly that we were found not to have authorised, so that I guess was the most important point,” he said.

“We’ve always said all the way along that we didn’t condone copyright in any way. Copyright violations don’t benefit iiNet at all.

“We’d much prefer to be working with the studios now to try and find some way to be able to make this material legitimately available to customers.

“We think that’s the best way to be able to tackle piracy on the internet.”

‘Significant backlash’
Mr Lambrick says while the content providers are likely to appeal, their chances of getting a positive ruling are minimal. But he expects a huge backlash against the ruling.

He says it is likely they will lobby the Federal Government to change the Copyright Act and place more responsibility with ISPs in cracking down on illegal downloads.

“I actually expect that there will be significant backlash and significant lobbying on the part of the content owners who are actually a very powerful lobby group… and they’re more powerful than the ISPs,” he said.

“I expect you’ll see some Government intervention which will require ISPs to carry some of the burden that they’re not otherwise required to carry… as part of the decision.

“They will appeal, I expect, to the full court of the Federal Court and argue that Justice Cowdroy’s decision was wrong in law. But I expect at the same time they will be lobbying the Federal Government to amend the Copyright Act.”

Mr Gane says there needs to be sector-wide reform and Government legislation could be part of the solution.

“We are confident that the Government will certainly not support a policy outcome which allows for copyright infringement to continue unabated on the internet,” he said.

But Mr Lambrick maintains irrelevant of the reasoning behind the decision, a favourable ruling was needed for ISPs to avoid severely impacting the industry.

“Regardless of the reasoning behind the decision is was probably an appropriate outcome on policy grounds,” he said.
“Because when you think about it, a judgement against iiNet would have resulted in many, many content owners bombarding ISPs with claims of breach.

“It would have had a very adverse effect on their business models, because compliance costs would be very, very significant. So it would seriously have impacted up on the internet industry”

AFACT says it is still reviewing the judgement but has not ruled out appealing against the decision.